US Services Growth Slows as Iran Oil Shock Drives Inflation to Four-Year Highs

Key Facts

The US services sector signaled a broader slowdown in March as the S&P Global Services PMI plunged into contraction, aligning with the decline in the ISM Services PMI to 54.0. Despite the overall cooling, the ISM New Orders component surged to its highest level since February 2023, suggesting that underlying demand remains resilient. Crucially, inflationary pressures facing services firms reached their highest level in four years, driven largely by the Iran-related oil shock. The employment index remained in contraction territory as firms grew cautious, while market reaction saw gold prices edge higher and the Dow Jones Industrial Average gain approximately 0.2%. S&P Global economists noted that new tariffs are further exacerbating economic uncertainty alongside ongoing Middle East tensions. Consequently, market expectations for Federal Reserve rate cuts remained flat as investors weighed labor market weakness against record price pressures.